China to Close a Lending Loophole

Draft Rules Would Limit Lenders' Ability to Route Loans Through Shadow-Banking System

Nov. 27, 2013 11:54 a.m. ET

BEIJING—A Chinese regulator is planning to make it harder for banks to use the nation's sprawling shadow-banking system to get around lending limits, the latest salvo in its efforts to rein in credit growth.

According to two bankers who have seen draft rules put together by the China Banking Regulatory Commission, the regulator wants to limit the ability of financial institutions to label corporate loans as loans between banks, which are typically of lower risk and subject to fewer restrictions. The process typically...